Adviser says U.S. close to Mexico-only NAFTA deal, Canada unmoved

WASHINGTON (Reuters) - The United States is getting “very, very close” to having to move forward on its trade deal with Mexico without Canada, White House economic adviser Kevin Hassett said on Friday.

White House Council of Economic Advisers Chairman Kevin Hassett addresses reporters during the daily briefing at the White House in Washington, U.S. February 22, 2018. REUTERS/Jonathan Ernst

There is just over a week to go before a U.S.-imposed Oct. 1 deadline to publish the text of a deal to update the North American Free Trade Agreement, and the United States and Canada have still not agreed on terms, Hassett told Fox News Channel.

“We’re still talking to Canada, and we’re getting very, very close to the deadline where we’re going to have to move ahead with Mexico all by themselves,” said Hassett, who chairs the White House Council of Economic Advisers.

Washington reached a bilateral trade deal with Mexico in late August and is threatening to exclude Canada if need be.

Canadian Foreign Minister Chrystia Freeland left Washington on Thursday after two days of inconclusive talks with U.S. Trade Representative Robert Lighthizer.

Asked for a reaction to Hassett’s comments, a Freeland spokesman pointed to her repeated comments that Canada “will not be driven by a deadline but by reaching a good deal”.

Investor concerns over the future of the 1994 pact, which underscores $1.2 trillion in annual trade, have regularly hurt stock markets in all three countries, whose economies are highly integrated.

A senior White House official on Friday said he hoped Canada would agree to join the U.S.-Mexico trade deal by the end of the month, adding he thought U.S. lawmakers would support a bilateral deal with Mexico if that did not happen.

But Canada says it does not believe U.S. President Trump has the power to unilaterally turn NAFTA into a two-nation agreement. U.S. business groups and some senior Democrats say NAFTA must be preserved as a trilateral grouping.

Access to Canada’s dairy market, trade dispute settlement panels and U.S. demands for the ability to impose auto tariffs on its northern neighbour remain sticking points.

“I’m a little surprised that the Canadians haven’t signed up yet,” Hassett said.

“I worry that politics in Canada is trumping common sense because there’s a very good deal that was designed by Mexico and the U.S. to appeal to Canada. And they’re not signing up and it’s got everybody over here a little bit puzzled.”

Freeland and Lighthizer are due in New York next week for the United Nations General Assembly, but it was unclear if they would meet.

Additional reporting by David Lawder in Washington and David Ljunggren in Ottawa, writing by David Lawder; editing by Chizu Nomiyama, Bernadette Baum and Susan Thomas